The State Capitol in Albany (photo: Michael Appleton/Mayoral Photography Office)
As New York State faces a severe budget shortfall and awaits federal aid, some lawmakers and activists are advocating for a package of legislation that would increase taxes on the state’s wealthiest residents to avoid cuts to services for the most vulnerable. Among those proposals is a bill that would tax inheritances for multi-millionaires and raise as much as $8 billion for the state every year, according to supporters’ calculations.
State Senator Jabari Brisport of Brooklyn and Assemblymember Michaelle Solages of Long Island, both Democrats, introduced the companion bills in their respective legislative houses to establish the new “heirs tax,” a part of the Invest in Our New York Act, which includes additional legislation to increase or create new taxes on millionaires and billionaires, Wall Street activity, and corporations. Proponents of the six-bill package estimate it would altogether raise $50 billion in annual revenue and would help forestall austerity measures by the state.
Governor Andrew Cuomo estimated in his recently-released executive budget that the state faces a $15 billion deficit for the current fiscal year and the next, and has been warning for months that without adequate federal stimulus dollars, he will be forced to slash aid to localities, which pays for education, social services and other programs, while also planning a relatively minor income tax increase on the state’s top earners. Cuomo, whose estimation of that deficit has been debunked given significant federal aid and higher than expected tax revenue, has repeatedly argued that the state cannot tax its way out of the current fiscal crisis that does exist -- in part to avoid pushing wealthier New Yorkers to relocate to other, lower-tax states -- and is calling for $15 billion in aid from the federal government.
New York’s current estate tax allows residents to receive nearly $6 million through inheritances without paying taxes, a system that advocates say is regressive and allows the accumulation of generational familial wealth without benefit to the public good. The heir’s tax proposal would amend that by creating a separate inheritance tax while also establishing taxes on receiving gift income, changing estate tax rates, and creating a new gift tax on donors.
The bill would tax inheritances in excess of $250,000, exempting retirement and pension funds. It also allows $2 million to be excluded from the taxable value of a primary family residence if the value of the inheritance is below $5 million, a provision that was included because of rapid gentrification in parts of New York City. There is a similar exemption in the bill for the value of family farms across the state.
“At a time when working-class people are fighting just to survive, New York’s most privileged dynasties are living more lavishly than ever off of vast sums of inherited wealth,” Brisport said in a statement. “I am proud to be introducing the Heirs Tax with Senator Sanders because it has never been more urgent that we require New York’s ultra-rich to pay equitable taxes on the fortunes they are handed.” Brisport referred to State Senator James Sanders Jr., a Queens Democrat who is co-sponsoring the bill. The bill has ten other co-sponsors in the 63-seat Senate. The Assembly bill also has ten co-sponsors besides Solages in the 150-seat Assembly.
Under the lowest bracket, inheritances between $250,000 and up to $500,000 would be taxed at 5%, while at the higher end, any inheritance income in excess of $10 million would be taxed at 50% – it is a marginal tax and only the amount above $10 million would be subject to it. Similarly, up to $50,000 in gift income would be exempt from the new gift income tax. Between $50,000 and $100,000 in gift income would be taxed at 5%; gift income in excess of $2 million would be taxed at 50% (again, taxing the amount above $2 million). The bill would also increase taxes on gifts worth more than $750,000.
“It is time for each of us to do our part in building back a better and more equitable New York, said Solages, who chairs the Black, Puerto Rican, Hispanic & Asian legislative caucus. “We must invest in New Yorkers who make up the foundations of our society and economy. High-income New Yorkers must contribute their fair share to ensure our middle and low-income families recover from the COVID-19 pandemic. Working with Senator Brisport and the Invest in Our New York Coalition, we have introduced legislation to reform the inheritance and estate tax. Revenue generated can rebuild New York’s economy, prevent cuts to our schools and essential services, as well as finally begin the long journey back to true wealth equity in our state.”
In response to the heirs tax proposal, EJ McMahon of the Empire Center think tank argued that it would lead wealthy New Yorkers to "remove themselves from New York taxation" and the $8 billion annually would not be achieved. McMahon also noted that New York is currently "one of only 12 states that impose a tax on estates of deceased residents" and that "only six states have inheritance taxes, with rates from 10 to 18%."
The Invest in Our New York coalition is comprised of prominent progressive advocacy groups including the Alliance for Quality Education, Citizen Action, Empire State Indivisible, Make the Road New York, New York Communities for Change, New York Working Families Party, NYC-DSA, Strong Economy for All, VOCAL-NY, New York Communities for Change, and Upstate Downstate Housing Alliance/Housing Justice for All.
Note: this story has been updated with additional information and commentary from EJ McMahon.
Note: this story has been updated to note Assemblymember Solages represents a district in Long Island, not the Hudson Valley.
Ben Max contributed to this story.